MODUL PERKULIAHAN Distinctive Strategic Management Marketing issues Segmenting Strategy Targeting Strategy Positioning Strategy Fakultas Program Studi Ekonomi & Bisnis Magister Manajemen Tatap Muka 11 Kode MK Disusun Oleh 35009 Dr. Baruna Hadibrata, SE., MM Abstract Kompetensi This module illustrates Marketing issues Segmenting Strategy Targeting Strategy Positioning Strategy Understanding Marketing issues Segmenting Strategy Targeting Strategy Positioning Strategy Pembahasan Ethical Issues in Marketing Ethical problems in marketing stem from conflicts and disagreements. Each party in a marketing transaction brings a set of expectations regarding how the business relationship will exist and how transactions should be conducted. Each facet of marketing has ethical danger points as discussed below. Market Research Some ethical problems in market research are the invasion of privacy and stereotyping. The latter occurs because any analysis of real populations needs to make approximations and place individuals into groups. However, if conducted irresponsibly, stereotyping can lead to a variety of ethically undesirable results. Market Audience Selective marketing is used to discourage demand from so-called undesirable market sectors or disenfranchise them altogether. Examples of unethical market exclusion are past industry attitudes to the gay, ethnic minority, and plus-size markets. Another ethical issue relates to vulnerable audiences in emerging markets in developing countries, as the public there may not be sufficiently aware of skilled marketing ploys. Ethics in Advertising and Promotion In the 1940s and 1950s, tobacco used to be advertised as promoting health. Today an advertiser who fails to tell the truth offends against morality in addition to the law. However the law permits puffery (a legal term). The difference between mere puffery and fraud is a slippery slope. Sexual innuendo is a mainstay of advertising content, and yet is also regarded as a form of sexual harassment. Violence is an issue especially for children's advertising and advertising likely to be seen by children. 2016 2 Distinctive Strategic Management Dr. Baruna Hadibrata,SE.,MM Pusat Bahan Ajar dan eLearning http://www.mercubuana.ac.id The advertising of certain products may strongly offend some people while being of interest to others. Examples include: feminine hygiene products as well as hemorrhoid and constipation medication. The advertising of condoms has become acceptable in the interests of AIDS-prevention, but are nevertheless seen by some as promoting promiscuity. Through negative advertising techniques, the advertiser highlights the disadvantages of competitor products rather than the advantages of their own. These methods are especially used in politics. Delivery Channels Direct marketing is the most controversial of advertising channels, particularly when approaches are unsolicited. TV commercials and direct mail are common examples. Electronic spam and telemarketing push the borders of ethics and legality more strongly. Deceptive Advertising and Ethics Deceptive marketing is not specific to one target market, and can sometimes go unnoticed by the public. There are several ways in which deceptive marketing can be presented to consumers; one of these methods is accomplished through the use of humor. Humor provides an escape or relief from some kind of human constraint, and some advertisers intend to take advantage of this by deceptively advertising a product that can potentially alleviate that constraint through humor. Anti-competitive Practices Bait and switch is a form of fraud where customers are "baited" by advertising for a product or service at a low price; second, the customers discover that the advertised good is not available and are "switched" to a costlier product. Planned obsolescence is a policy of designing a product with a limited useful life, so it will become unfashionable or no longer functional after a certain period of time and put the consumer under pressure to purchase again. 2016 3 Distinctive Strategic Management Dr. Baruna Hadibrata,SE.,MM Pusat Bahan Ajar dan eLearning http://www.mercubuana.ac.id A pyramid scheme is a non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public. Pricing Ethics Bid rigging is a form of fraud in which a commercial contract is promised to one party, although for the sake of appearance several other parties also present a bid. Predatory pricing is the practice of selling a product or service at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors. Using Ethics as a Marketing Tactic Major corporations fear the damage to their image associated with press revelations of unethical practices. Marketers have been quick to perceive the market's preference for ethical companies, often moving faster to take advantage of this shift in consumer taste. This results in the propagation of ethics itself as a selling point or a component of a corporate image. Marketing ethics, regardless of the product offered or the market targeted, sets the guidelines for which good marketing is practiced. To market ethically and effectively one should be reminded that all marketing decisions and efforts are necessary to meet and suit the needs of customers, suppliers, and business partners. The mindset of many companies is that they are concerned for the population and the environment in which they due business. They feel that they have a social responsibility to people, places and things in their sphere of influence. Today, Segmentation, Targeting and Positioning (STP) is a familiar strategic approach in Modern Marketing. It is one of the most commonly applied marketing models in practice. In our poll asking about the most popular marketing model it is the second most popular, only beaten by the venerable SWOT / TOWs matrix. This popularity is relatively recent since 2016 4 Distinctive Strategic Management Dr. Baruna Hadibrata,SE.,MM Pusat Bahan Ajar dan eLearning http://www.mercubuana.ac.id previously, marketing approaches were based more around products rather than customers. In the 1950s, for example, the main marketing strategy was 'product differentiation'. The STP model is useful when creating marketing communications plans since it helps marketers to prioritise propositions and then develop and deliver personalised and relevant messages to engage with different audiences. This is an audience rather than product focused approach to communications which helps deliver more relevant messages to commercially appealing audiences. The diagram below shows how plans can have the flow from STP is relevant to digital marketing too, where applying marketing personas can help develop more relevant digital communications as shown by these alternative tactical customer segmentation approaches. 2016 5 Distinctive Strategic Management Dr. Baruna Hadibrata,SE.,MM Pusat Bahan Ajar dan eLearning http://www.mercubuana.ac.id In addition, STP focuses on commercial effectiveness, selecting the most valuable segments for a business and then developing a marketing mix and product positioning strategy for each segment. How to use STP? Through segmentation,you can identify niches with specific needs, mature markets to find new customers, deliver more focused and effective marketing messages. The needs of each segment are the same, so marketing messages should be designed for each segment to emphasise relevant benefits and features required rather than one size fits all for all customer types. This approach is more efficient, delivering the right mix to the same group of people, rather than a scattergun approach. You can segment your existing markets based on nearly any variable, as long as it’s effective as the examples below show: Well known ways to segment your audience include: 1. Demographics Breakdown by any combination: age, gender, income, education, ethnicity, marital status, education, household (or business), size, length of residence, type of residence or even profession/Occupation. An example is Firefox who sell 'coolest things', aimed at younger male audience. Though, Moshi Monsters however is targeted to parents with fun, safe and educational space for younger audience. 2. Psychographics This refers to 'personality and emotions' based on behaviour, linked to purchase choices, including attitudes, lifestyle, hobbies, risk aversion, personality and leadership traits. magazines read and TV. An example is Virgin Holidays who segment holidays into 6 groups. 2016 6 Distinctive Strategic Management Dr. Baruna Hadibrata,SE.,MM Pusat Bahan Ajar dan eLearning http://www.mercubuana.ac.id 3. Lifestyle This refers to Hobbies, recreational pursuits, entertainment, vacations, and other non-work time pursuits. Companies such as on and off-line magazine will target those with specific hobbies i.e. FourFourTwo for football fans. 4. Belief and Values Refers to Religious, political, nationalistic and cultural beliefs and values. The Islamic Bank of Britain offers Sharia compliant banking which meets specific religious requirements. 5. Life Stages Life Stages is the Chronological benchmarking of people’s lives at different stages. An example is Saga holidays which are only available for people aged 50+. They claim a large enough segment to focus on this life stage. 6. Geography Drill down by Country, region, area, metropolitan or rural location, population density or even climate. An example is Neiman Marcus, the upmarket department store chain in the USA now delivers to the UK. 2016 7 Distinctive Strategic Management Dr. Baruna Hadibrata,SE.,MM Pusat Bahan Ajar dan eLearning http://www.mercubuana.ac.id 7. Behaviour Refers to the nature of the purchase, brand loyalty, usage level, benefits sought, distribution channels used, reaction to marketing factors. In a B2B environment, the benefits sought are often about ‘how soon can it be delivered?’ which includes the ‘last minute’ segment - the planning in advance segment. An example is Parcelmonkey.co.uk who offer same day, next day and international parcel deliveries. 8. Benefit Benefit is the use and satisfaction gained by the consumer. Smythson Stationary offer similar products to other stationery companies, but their clients want the benefit of their signature packaging: tissue-lined Nile Blue boxes and tied with navy ribbon! Market targeting The list below refers to what’s needed to evaluate the potential and commercial attractiveness of each segment. Criteria Size: The market must be large enough to justify segmenting. If the market is small, it may make it smaller. Difference: Measurable differences must exist between segments. Money: Anticipated profits must exceed the costs of additional marketing plans and other changes. Accessible: Each segment must be accessible to your team and the segment must be able to receive your marketing messages Focus on different benefits: Different segments must need different benefits. Product positioning Positioning maps are the last element of the STP process. For this to work, you need two variables to illustrate the market overview. 2016 8 Distinctive Strategic Management Dr. Baruna Hadibrata,SE.,MM Pusat Bahan Ajar dan eLearning http://www.mercubuana.ac.id In the example here, I’ve taken some cars available in the UK. This isn’t a detailed product position map, more of an illustration. If there were no cars in one segment it could indicate a market opportunity. An example of a company using STP? Any time you suspect there are significant, measurable differences in your market, you should consider STP. Especially if you have to create a range of different messages for different groups. All three: (segmentation, targeting and positioning) are tools to align your products with the right customers. The fundamental premise is that every product (or service) offers different value for different customers. For example, if you are a bank trying to get people to use a checking/ATM account, you could think about diffrent types of customers that could benefit from that service. I can think of a few in particular: 2016 9 Distinctive Strategic Management Dr. Baruna Hadibrata,SE.,MM Pusat Bahan Ajar dan eLearning http://www.mercubuana.ac.id - High school kids - Students going to college - Families who relocate to a new state. Same product, three different customer groups that would need the product for quite different reasons: - High school kids might want to start saving, bulding their credit, maybe saving for college, and feel like they are special because they now have a real credit card. - College students might need the convenience of an ATM card, receiving money from family, and financial planning. - Families who relocate to a different state might need a new bank because of proximity of a branch, additional ATMs and other local services which their current bank may not offer. In this context then: Segmentation is the process to group customers in groups based on demographics, firmographics - or ideally, their needs Targeting is the process to market to a particular segment of the market Positioning is the development of messaging (value proposition) for a particular segment of the market. Why is it important? because if you tell a college student "We have a great checking account" you may not be as successful as telling the same student "We have the perfect financial solution for college students: an account that gives you convenient acces to your money, financial planning tools and monthly expenditure reports, and an easy way to receive money from your family" the alternative to segmentation, targeting and positioning is to do a shotgun approach with vanilla text, which is not very effective. Citing the words of Bonnie Gretzner (2007), “If you don't understand the details about customer segmentation, you're most likely letting customers--and sales--slip through your fingers,” says one expert. Nowadays, in customer-oriented era, companies attempt to break 2016 10 Distinctive Strategic Management Dr. Baruna Hadibrata,SE.,MM Pusat Bahan Ajar dan eLearning http://www.mercubuana.ac.id down markets into manageable parts of the consumer groups and treat them according to the similar characteristics, that are called market segmentation. In this sense, Geoff Lancaster and Paul Reynolds (2002) in the book of “Marketing,” state that increased competition, better informed and educated customers, and constant changing demands, urge companies to pay attention to segmentation issues. Segmentation has two approaches depending on who are your customers: segmenting organisational market and segmenting consumer market. As the study is undertaken on consumer product, looking at the bottled water in particular, natural mineral water consumers, therefore organisational market segmentation will not be discussed accordingly. On the website of the American Marketing Association, William D. Neal (2008) in the article of ”Principles of Marketing Segmentation” describes two ways of market segmentation: a priori and post hoc. A priori market segmentation is based on adoption already known and usually used technique of segmentation. In this case, companies do not conduct any research in order to identify which segment is most appropriate, but they simply chose specific segmentation approach. On the other hand, post hoc segmentation infers market segmentation based on the thorough research of the customers’ evidences that come up as variables, will become a background of the segmentation. Author recommends not using a priori segmentation as an ease job in order not to conduct a research. As he states, due to dynamic society,” a misssegmented market is often worse for the firm than the mass-market assumption”. Whereby, Mr. Neal depicts main variables, which should be considered for the research purposes. These set of variables are: product attribute preferences; values; product purchase pattern; product usage pattern; product benefits; brand preference; price sensitivity; brand loyalty; lifestyle; status; attitudes and opinions toward environment etc. Market segmentation, according to Frances Brassington and Stephen Pettit (1997) is important issue for any business, because customers or segments have different characteristics and preferences and these preferences are defined as variables, which must be considered by companies. Therefore, segmentation is a stage when the company identifies all clusters of possible consumers by grouping those consumers based on same needs, demands, requirements and other different characteristics. That consequently will become the pool of options to be targeted according attractiveness of the market(s). Typpes Of Market Segmentation 2016 11 Distinctive Strategic Management Dr. Baruna Hadibrata,SE.,MM Pusat Bahan Ajar dan eLearning http://www.mercubuana.ac.id Some basic segmentation methods will be discussed in order to identify alternatives for the following consideration, which is the most appropriate for the natural Sugar Cane juice. Geographic segmentation means to define customers according the location they live, for instance, European consumers. Geographical segmentation is very easy to define. It is easy for distribution system and establishing contacts with customers. But, the drawback of this kind of segmentation, as Douglas and Craig state in the book of “Principles of marketing” cited by F. Brassington and S. Pettite (1997), that concentrating only on the geographical area is not correct, because even in a small location customers can have diverse wants and needs. For example, in UK, people consider hot chocolate as a substitute to the coffee or tea and the bedtime drink. However, French consumers see the hot chocolate as a nourishing breakfast served with milk for children. Therefore, in addition to that it is important to make customer-focused segmentation. Demographic segmentation is deeper approach than geographic segmentation. It is concentrated on age, gender, race, income, occupation etc. Demographic segmentation is as easy to define as geographic. It is measurable as well and information can be accessible free. Advantage of demographic approach of segmentation, let us say age, is ease to make a profile of an age segment and according to that decide which strategy of communication and creative approach will be the most appropriate. On the other hand, similar to geographic segmentation, not all the customers in the same demographic range necessarily have the same needs and wants. Geo-demographic segmentation is a merger of above mentioned. For instance, if the wine company is selling old drinks in expensive price, company should know that some areas are populated with inhabitants of high income and some areas are poor. Psychographic segmentation or lifestyle segmentation is more complicated segmentation method than mentioned above. F. Brassington and S. Pettitt (1997) define lifestyle segment as it is not based on the product’s best qualities and the same issues but it is oriented towards customer’s emotional state, paying more attention on the benefits, which can be given to the customer. As Geoff Lancaster et al. (2002), describe psychographic and lifestyle segmentation it is about how individuals spend time and money based on the personality, attitudes, education, cultural and social background. Authors recognise early 1970s, J.T. Plummer’s idea of identification of this phenomenon based on the next measures: How individuals spend their time on activities; Their major interests; Their opinions about themselves and the world in general On the figure 2.2, Peter Cheverton in his book introduces UK lifestyle segmentation 2016 12 Distinctive Strategic Management Dr. Baruna Hadibrata,SE.,MM Pusat Bahan Ajar dan eLearning http://www.mercubuana.ac.id according to Martin Christopher Malcolm McDonald, 1995, who distinguish types of lifestyle and divides according to percentage. One of the psychological segmentation is behavioural segmentation, which considers separation of the customers according to their knowledge, attitudes, responses and uses of the product. P. Kotler and G. Armstrong (2006) introduce five different varieties of segmentation. Whereby, the first form of segmentation is occasional segmentation. It means that segmentation is done according the particular product usage. For example, Kotler and Armstrong bring an example of the orange juice producers, who encouraged drinking orange juice not only during the breakfast, but also consume at other times as well. Second type is benefit segmentation, looking at the benefits, which can be delivered to the customer according the attributes of the product. For example, tooth companies producing tooth paste for customers concerned to buy such tooth paste, which are effective for sensitive teeth with whitening features, etc. Benefit sought by Frances Brasington and Stephen Pettitt (2003) is seen in two scopes one is practical though (e.g. reliability, economic, etc.) and psychographically oriented (e.g. environmentally friendly, fast, healthier, etc.). In addition to that, according to Harvard Business Note (2000) segmentation is differentiated into two types: benefit segmentation and segmentation based on observable characteristics. Benefit segmentation can be divided into two parts, people who pay more attention on the results rather than side effects and people who are concerned on the gentleness of the product, avoiding side effects and concentrated on the results. Third type is user status segmentation, dividing consumers into the nonusers, ex-users, potential users, first-time users and regular users. There is also another form of segmentation based on usage bat it pays attention on the usage rate. It means that consumers are differentiated on the frequency or intensity of usage a product, in particular, light, medium and heavy users. The final, fifth method is studying customers based on the loyalty status, according which companies look at degree of loyalty towards company, product etc. Strong loyal customers are most targeted people by the companies whose service or product is attractive to the customers and try to sustain them by using different marketing programmes. On the other hand, not loyal or partially loyal customers can be targeted by other rival companies in order to take away them from competitors. On that basis, accordingly, loyalty segmentation can be divided into two categories: brand loyal and switchers. Some authors state that in some cases segmentation according to single variable is not enough. According the Harvard publication (2006) is introduced multifactor 2016 13 Distinctive Strategic Management Dr. Baruna Hadibrata,SE.,MM Pusat Bahan Ajar dan eLearning http://www.mercubuana.ac.id segmentation approach, when three factors are used to identify segment in “threedimensions”. Principal Requirement For Segmentation Revising different authors’ views about segmentation, gives possibility to come up to the principal criterions for marketing segmentation. First of all, segment must exist and not to be an object of the marketers’ imagination. Existing market must be measurable or identifiable in terms of size and purchasing power. Yet, this requirement in most occasions is difficult to comply, because census data do not exist. Following requirement is differentiability. It means that segment is distinguished and responds to the different marketing mix and other incentives in a changing way. For example, if married and unmarried women respond similarly to a new perfume, it means that they are within the same segment. Obviously, segment must be accessible or reachable in order to establish connection. On the other hand, in terms of business prospective segment must be substantial and stable for a significantly long period. Under this requirement is mentioned that tailored marketing program should be targeted to the significant amount of people with the same needs and characteristics. In addition to that, amount should be such a big that business should be profitable. And, final requirement is actionable criterion, which concludes company’s capability to deal with so many segments as it is possible from the company’s extent of resources (Kotler, Armstrong, 2006; Green and Tull, 1978; cited by Neal, 2008). Due to the correct market segmentation, company can benefit from distribution point of view, carry out business in an effective and efficient way, increase sales/profit and market share. However, market segmentation becomes a dilemma for the company, because of different reasons, such as incorrect formulation of marketing strategy, incorrect understanding of the customers behaviour regarding to the marketing mix, more theoretical rather than practical approach choosing wrong variables. 2016 14 Distinctive Strategic Management Dr. Baruna Hadibrata,SE.,MM Pusat Bahan Ajar dan eLearning http://www.mercubuana.ac.id Daftar Pustaka “Issues in Marketing.” Boundless Marketing. Boundless, 21 Jul. 2015. Retrieved 17 Nov. 2015 from https://www.boundless.com/marketing/textbooks/boundless-marketing-textbook/socialresponsibility-and-ethics-in-marketing-16/ethics-in-marketing-102/issues-in-marketing-50210770/ D. Aaker, Managing Brand Equity (New York: Free Press, 1991), 164. P. Kotler, J. T. Bowen, and J. C. Makens, Marketing for Hospitality and Tourism, 4th ed. (Upper Saddle River,NJ:Prentice Hall, 2006), 278-279. 4 http://enus.nielsen.com/tab/product_families/nielsen_claritas/prizm,March 18,2010. 5 http://en.wikipedia.org/wiki/Claritas_Prizm, May 10, 2010. K. Clancy and P. Krieg, Your Gut Is Still Not Smarter than Your Head (Hoboken, NJ: Wiley, 2007), 5980. 8 P. R. Dickson and J. L. Ginter, "Market Segmentation, Product Differentiation, and Marketing Strategy," Journal of Marketing (April 1987): 1—10. 9 S. Dibb, "Criteria Guiding Segmentation Implementation: Reviewing the Evidence,''' Journal of Strategic Marketing! (1999): 107—129 10 W. R. Swinyard and K. D. Struman, "Market Segmentation: Finding the Heart of Your Restaurant's Market," Cornell Hotel and Restaurant Administration Quarterly 37 (1) (May 1986): 88-96. Ibid. Dibb, 1999. Swinyard and Struman, 1986. Dickson and Ginter, 1987. R. Kennedy, and A. Ehrenberg, "There Is No Brand Segmentation," Marketing Research (Spring 2001): 4 - 7. 16 Ibid. Modified from M. Lynn, "Brand Segmentation in the Hotel and Cruise Industries: Fact or Fiction?" Cornell Hospitality Report 7(4) (2007): 12. 18 K. Hammond, A. S. C. Ehrenberg, and G.J. Goodhardt, "Market Segmentation for Competitive Brands," European Journal of Marketing 30(12) (1996): 39-49; Ibid. 19 Ibid.; J. Dawes, "Interpretation of Brand Penetration Figures that Are Reported by Sub-groups," Journal of Targeting, Measurement and Analysis for Marketing 14(2) (2006): 173-183.; and G. Fennel, G. M. Allenby, S. Yang, and Y. Edwards, "The Effectiveness of Demographic and Psychographic Variables for Explaining Brand and Product Category Use," Quantitative Marketing and Economics 1 (2003): 223-244. 2016 15 Distinctive Strategic Management Dr. Baruna Hadibrata,SE.,MM Pusat Bahan Ajar dan eLearning http://www.mercubuana.ac.id Hammond, Ehrenberg, and Goodhardt, 1996. "History of Loyalty Programs," www.frequentflier.com/ffp-005.htm, February 3, 2008. G. Hallberg, All Consumers Are Not Created Equal (New York: Wiley, 1995). B. Berman, "Developing an Effective Customer Loyalty Program," California Management Review 49(1) (2006): 123-148. 24 J. Leenheer, H. J. vanHeerde, T. H. A. Bijmolt, and A. Smidts, "Do Loyalty Programs Enhance Behavioral Loyalty? An Empirical Analysis Accounting for Self-Selecting Members," International Journal of Research in Marketing 24 (2007): 31 — 47; L. Meyer-Waarden and C. Benavent, "The Impact of Loyalty Programs on Repeat Purchase Behavior," Journal of Marketing Management 22 (2006): 6188.; and B. Sharp and A. Sharp, "Loyalty Programs and Their Impact on Repeat-Purchase Loyalty Patterns," International Journal of Research in Marketing 14 (1997): 473-486. 25 E. C. Hackelman and J. M. Duker, "Deal Proneness and Heavy Usage: Merging Two Market Segmentation Criteria," Journal of the Academy of Marketing Science 8(4) (1980): 332-344; Hallberg, 1995; and B. D. Kim and P. E. Rossi, "Purchase Frequency, Sample Selection, and Price Sensitivity: The Heavy User Bias," Marketing Letters 5(1) (1994): 57-67; and J. W. Taylor, "A Striking Characteristic of Innovators," Journal of Marketing Research 14 (February 1977): 104-107. 26 M. Lynn, "Frequency Strategies and Double Jeopardy in Marketing: The Pitfall of Relying on Loyalty Programs," Cornell Hospitality Report 8(2) (2008). 27 A. A. C. Ehrenberg, G. J. Goodhardt, and T. P. Barwise, "Double Jeopardy Revisited, Journal of Marketing 54 (July 1990): 82-91. 28 M. D. Uncles, G. R. Dowling, and K. Hammond, "Customer Loyalty and Customer Loyalty Programs, Journal of Consumer Marketing 20(4) (2003): 294-316. Lancaster G. and Massingham, L. (1988) Essentials of Marketing. Maidenhead, Berkshire, England. McGraw-Hill. Smith, W. R. (1956). Product differentiation and market segmentation as alternative marketing strategies. Journal of Marketing. (Vol. 21, Issue 1, July). p3-8. 2016 16 Distinctive Strategic Management Dr. Baruna Hadibrata,SE.,MM Pusat Bahan Ajar dan eLearning http://www.mercubuana.ac.id
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